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Technologies Of The Year -- Powerchain Version 4.0

Few costs on the balance sheet are less productive than those that cover inventory expenses. And as supply-chain networks become more and more complex, strategic placement and control of inventories -- and reduction of the cost to manage them -- become even more challenging. Introduced in mid-September, PowerChain supply-chain design and optimization software, version 4.0 from Optiant Inc., Burlington, Mass., allows today's cross-functional supply chain-management teams to place the optimum amounts of inventory at the right place and at the right time. The net effect is to maximize service levels and minimize manufacturing and total supply-chain costs. PowerChain operates "on top" of and extends the functionality of existing ERP and finite capacity scheduling systems, allowing users to model the supply chain and optimize its performance. "We put a steering wheel on inventory management," says Dan Ross, CEO. According to the company, application of PowerChain typically returns 20% to 50% savings on inventory costs, including things such as holding costs, work-in-process inventories and finished goods inventories. In addition, 10% to 30% increases in service levels are obtained in terms of order fulfillment performance relative to delivery commitments. "And it doesn't take years and millions of dollars of spending for customers to measure the impact of using PowerChain," says Ross. "We have shown major manufacturers tens of millions of dollars of savings and more competitive supply chains within 90 days." Customers seem to agree as sales of the product have about doubled every quarter from the third quarter of 2001 to the second quarter of 2002. Web-based PowerChain is designed for use by all of the stakeholders that make up the supply-chain team. The system uses a drag-and-drop interface to create a flow-chart-like graphic presentation of the supply chain. Patent-pending algorithms do the complex mathematics required to "solve" the supply-chain challenges to optimize costs and performance. "This product is easily used by the people actually running the supply chain," says Ross. "It's no longer this complex mess in the back office that Ph.D.s have to work with while struggling over static spreadsheets." Planners juggle things such as supply-and-demand risk factors, effect of different service levels on key customers and the remaining marketplace, impact of overstock and obsolescence, as well as time to market, to tweak supply-chain models. The system then optimizes the given supply chain, but also makes recommendations on how to change supply-chain structure to increase performance in areas such as days of supply and inventory turns. Version 4.0 brings new functionality to supply-chain optimization, not available in previous Optiant or other supply-chain solutions, according to the company. Time-phasing capability allows optimizations over periods of time and supply-chain phases, recognizing that demand is not static. For instance it allows for variability even within peaks of known seasonal demand. Version 4.0 now allows manufacturers managing production of the same part in different locations to share raw materials effectively and reduce replicated inventories. This is especially critical for companies balancing common-part manufacture between in-house and contract sources. Also, the new version suggests supply-chain efficiencies across the entire supply chain, not simply within the enterprise.